Power grab: No ‘good guy’ in Boulder’s attempt to seize Xcel

The City of Boulder vs. Xcel Energy — hmmm, that’s a tough choice for the rest of us. It’s like deciding whom to root for when Iraq fights Iran.

Many Boulderites, you’ll recall, were unhappy with Xcel’s rates, its profits and what they thought was its slow progress in converting to renewable energy. They wanted to municipalize the power system in the city. The city council put the issue to a vote in 2011.

By a narrow margin, voters (1) authorized the city to take over Xcel’s local assets if research showed it could provide power at the same or lower rate and (2) levied a fee of about $1.20 a month per customer to pay for the research and legal costs of municipalization.

Condemnation proceedings could begin as early as August.

But a group called Voter Approval of Debt Limits (VADL) is trying make sure that nothing happens until residents set a limit on the debt Boulder could incur to buy out Xcel. There is no debt ceiling now. It also wishes to give the 5,800 households in Boulder County, but outside city limits, a chance to vote on the city takeover since they would be involved.

The 5,800 weren’t in the original proposal, but the city discovered that two Xcel substations it wants to take over also serve the customers outside the city.

Xcel has asked the Public Utilities Commission to rule that Boulder cannot unilaterally take over its customers outside the city. The utility believes that only the PUC has the power to determine service territories. Boulder argues that the PUC has no jurisdiction and the city’s power to condemn Xcel’s facilities comes from the state constitution.

The PUC has agreed to review the issue. Its decision, of course, can be appealed to the courts.

Voter Approval of Debt Limit isn’t involved in the Xcel appeal to the PUC, said spokeswoman Katy Atkinson. If the commission rules in favor of the city, the group would still argue that the city should let the suburbanites vote. If it rules for Xcel, the issue becomes moot.

The citizens’ group group is now in the process of gathering the 5,000 signatures needed to put their charter amendment on the Nov. 5 ballot.

Specifically, the amendment demands that voters approve the maximum amount of debt the city can incur to take over Xcel’s properties; that the bond house managing the issue charge no more than 1 percent of the proceeds; and that registered electors outside city limits who might be served by the city be given a chance to vote on the debt limit issue.

The city is recommending that the bond contract be negotiated instead of put up for a competitive bid, claiming that could actually save money.

But that would require a charter change, which the council is likely to put on the November ballot. VADL doesn’t care how the bond contract is handled so long as there is a limit on the debt.

Proponents of the city’s takeover do not favor another vote, of course, because they could easily lose. Their margin of victory in 2011 was much smaller than the number of households outside city limits who might be voting in a second election.

Steve Pomerance, a former city council member promoting condemnation, argued in the Boulder Daily Camera that no second vote should be held because “neither the city nor the utility has the power to hold such an election. And the county cannot agree to hold an election for some arbitrary sub-group of its electors.”

That’s one argument to prevent those you want to take over from having a say in the matter.

He also accused Xcel of being behind VADL’s petition drive.

Atkinson conceded that the proposed ballot question was based on an Xcel poll but denied that the utility was guiding strategy or contributing any cash. “Hopefully they’ll be involved eventually,” she frankly admitted.

The 2011 ballot issue said that Boulder would go ahead with condemnation only if research demonstrates the municipal utility could meet or beat Xcel’s rates. But that equality, according to Atkinson, applies only to Day One. “On Day Two they can start raising rates to anywhere they want.” That’s why her group wants a limit on debt. Rates may depend on how quickly environmentalists running the municipal utility want to expand the use of expensive alternative energy.

Estimates of what it might cost to buy out Xcel through condemnation vary greatly, upwards from the hundreds of millions. Probably Xcel will demand three times what it figures it can get, and Boulder will offer about a third of what it fears the real value is. That’s standard.

The biggest variable is something called “stranded costs,” an economic term that applies mainly to electric utilities. It has something to do with how much more you can make from your assets if you’re a regulated utility than you would if you had to face market competition. Boulder thinks it should pay none; the utility estimates such costs should bring it at least $255 million.

The question is ultimately more political than economic, as it’s the Federal Energy Regulatory Commission that will determine the answer.

In an ideal world, Xcel would extract as much as possible from Boulder and its citizens, force their rates way up, then give the rest of its customers a break on our rates. That’s an updated version of Soapy Smith’s old dictum: “We cheat the other guy and pass the savings on to you.”

Longtime Rocky Mountain News political columnist Peter Blake now writes Thursdays for CompleteColorado.com. Contact him at pblake0705@comcast.net You may re-publish his work at no charge and without further permission; please give full credit to Peter Blake and www.CompleteColorado.com